The CEOs of the two companies have traded barbs on Twitter, and much news has been made of Sprint falling behind its rival in total customer count. But, while the third- and fourth-place wireless carriers fight with each other, their real rivals are AT&T (NYSE:T) and Verizon (NYSE:VZ), the top two carriers in the wireless industry.
The two leaders have roughly twice the paying customers as their rivals, but T-Mobile, which has posted over two years of impressive gains, has shown that it's possible to gain ground. Possible, but not easy, and Sprint and T-Mobile both have a long way to go.
Three Motley Fool contributors weighed in on how the two companies may breach the gap and catch up with AT&T and Verizon.
Adam Levy (Get in with Dish Network): Verizon is working on a mobile-first streaming service that will include live sports content from ESPN as well as content from other stalwart TV networks and online outlets like AwesomenessTV. One of the only streaming outlets with live sports is Dish Network's (NASDAQ:DISH) Sling TV.
Partnering or merging with Dish Network to promote Sling TV could provide significant benefits for either T-Mobile or Sprint. Not only does Dish have one of the best options for mobile video streaming, it also has boatloads of wireless spectrum licenses, including most of the 700 MHz E Block across the lower 48. That spectrum could ease the pressure for both smaller competitors to spend heavily in the upcoming 600 MHz incentive auction.
In light of the FCC approval of the DirecTV/AT&T merger, a similar deal between Sprint or T-Mobile and Dish Network is a shoo-in for approval. The Wall Street Journal reported in June that Dish is already in talks with T-Mobile about a merger. Bloomberg reported in July, however, that talks had stalled because of valuation and the structure of the deal. If T-Mobile (or Sprint) is serious about competing with Verizon and AT&T, getting a deal done is in its best interest.
Chris Neiger (Keep adding new value at low prices): One advantage T-Mobile has had over its competition is its ability to add lots of subscribers quarter after quarter. In Q2 2015, T-Mobile added 2.1 million net customers, which was the ninth consecutive quarter the company added more than 1 million subscribers. And this isn't by accident. T-Mobile has convinced users to switch by offering them low-cost plans that are chock-full of freebies.
On T-Mobile, a family of four can get unlimited talk, text, and 10 GB of 4G LTE data each, for just $140 per month. On Verizon, a family of four would get nearly all of that for the same price, but they would have to share a single data bucket of 10 GB. Additionally, T-Mobile customers get features like its new Mobile Without Borders plan, which allows customers to use their smartphones in Canada and Mexico just like they do in the U.S. -- something AT&T is working toward, but T-Mobile accomplished first. The carrier also offers music streaming over its network that doesn't count against a customer's data usage, and a data stash plan that allows users to keep unused data month after month.
These cheaper prices and add-on features add up to a serious advantage, partially when it comes to snagging Verizon and AT&T customers. According to a survey released by Consumer Intelligence Research Partners earlier this year, Verizon and AT&T customers typically switch to a new carrier because they believe their smartphone bills are too high. If T-Mobile can keep its prices lower than the competition and continue piling on the freebies, the so-called Uncarrier may start eating into Verizon's and AT&T's lead.
Daniel B. Kline (Keep improving their networks): For years, Verizon and AT&T had a legitimate advantage over T-Mobile and Sprint. The two companies had appreciably better networks, and that trumped everything else. Sprint and T-Mobile could offer cheaper prices and any other gimmick, but that hardly mattered if their networks were inferior (and they used to be).
Those days, however, are mostly over. AT&T and Verizon still have the strongest networks, but the gap is shrinking to the point where it may not matter. At the end of 2014, the twice-annual survey from RootMetrics showed the gains T-Mobile and Sprint have made.
The survey explained that Sprint and T-Mobile have made major gains:
While Verizon and AT&T top the charts, all networks are getting better. We saw improvements across the board in data speed and data reliability, which are fast becoming keys to everyday mobile experience. The biggest improvement stories belong to T-Mobile and, especially, Sprint with its marked call improvement.
To catch up to AT&T and Verizon, the two upstarts need to keep pushing their networks ahead. At some point (and that point is soon), that will remove the one advantage the market leaders have.
Once that happens, things like price and device selection -- where Sprint and T-Mobile lead the way -- will become the deciding factors for consumers. Once that occurs, the big two could see their customers defect in droves.
Adam Levy has no position in any stocks mentioned. Chris Neiger has no position in any stocks mentioned. Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.